Company information should go to the market first

The deal between goldminer Newcrest Mining and the Australia Securities and Investments Commission for Newcrest to pay a $1.2 million fine should make one thing clear, again. Companies cannot give more information to some analysts than to ­others, or to the market in general. Whatever companies say that is materially new has to go to everybody at the same time.

Newcrest executives gave to analysts revised production forecasts that were not available to the market, in order to lower expectations ahead of a downgrade. Those disclosures had an obvious effect on share prices and ordinary shareholders lost money. Newcrest’s subsequent large fine and public shaming has now served to remind all listed company executives that they must abide by the disclosure rules.

It would be perverse if such rules had the unintended consequence of stifling communication to the market, so they must not be over-interpreted and over-enforced. But Australia’s rules have not yet hindered company communications. The rounds of broker lunches, investor briefings, and one-on-ones all still go on – provided the market knows first. To ensure that there are no Newcrest-style breaches, an obvious standard practice should be that any presentation to analysts could be sent to the securities market at the same time, with any new information clearly identified. This should apply also, for example, when analysts visit mine sites to talk to the operations people.

There will also be some difficulties over what is considered to be “material", but those issues have been a part of a company’s legal considerations for many years.

The key point in the Newcrest decision remains one that should have been absorbed by companies years ago. They are free to promote their causes to analysts, but not to disclose new information without making a general announcement.